Tata Consultancy Services (TCS), India’s largest IT services company, delivered a mixed set of numbers for the December quarter, leaving investors with plenty to think about. While revenue and margins came in better than expected, net profit disappointed both on a quarter-on-quarter basis and against Street estimates.
For Q3, TCS reported a consolidated net profit of ₹106.5 billion, down sharply from ₹120.7 billion in the previous quarter. The figure also missed market expectations of ₹127.71 billion, making profit the biggest weak spot in the company’s earnings report.
At the same time, the company offered a positive surprise on the topline. Revenue rose to ₹670 billion, up from ₹657.99 billion in Q2, and slightly above analyst estimates of ₹667.28 billion. This suggests that demand for TCS’s services remains resilient, even as global technology spending stays cautious.
Revenue holds firm despite global uncertainty
The December quarter is traditionally strong for IT companies, but this year it came amid an uncertain global backdrop. Enterprises across the US and Europe have been tightening budgets, delaying projects, and taking a closer look at technology spending.
Against this backdrop, TCS’s ability to grow revenue quarter-on-quarter is notable. The jump from ₹657.99 billion to ₹670 billion shows that deal execution and client spending have held up better than many feared.
While the growth is not spectacular, it beats market expectations and signals that TCS is still finding room to expand even in a slower demand environment.
How Q3 compares with last quarter
Here’s a quick snapshot of how TCS performed compared with the previous quarter:
| Metric | Q2 FY26 (Sep 2025) | Q3 FY26 (Dec 2025) | Change |
|---|---|---|---|
| Sales (₹ Cr) | 65,799 | 67,000* | ▲ ~1.8% |
| Expenses / Purchases (₹ Cr) | 47,821 | ~50,100* | ▲ |
| EBITDA / Operating Profit (₹ Cr) | 17,978 | 16,900–17,000* | ▼ |
| Net Profit (₹ Cr) | 12,131 | 10,650 | ▼ 12.2% |
| EPS (₹) | 33.37 | ~29.3* | ▼ |
*Q3 figures are aligned with the headline results: Revenue ₹670 billion, Net Profit ₹106.5 billion, EBIT ₹169 billion.
This table captures the core story of the quarter: sales edged higher, but profit slipped sharply compared with the previous three months.
Profit takes a hit
The bigger concern in the results lies in the bottom line. Net profit dropped from ₹120.7 billion in Q2 to ₹106.5 billion in Q3, and the number came in well below the Street’s estimate of ₹127.71 billion.
A quarter-on-quarter decline of this scale often raises questions around:
- cost pressures
- currency movements
- employee-related expenses
- project mix and pricing
Although the company has not flagged any one-off shock in these headline numbers, the profit miss is likely to weigh on investor sentiment in the short term. For many market participants, profit is the clearest indicator of operational health. When it falls even as revenue rises, it suggests that costs are rising faster than income in parts of the business.
How this quarter compares with last year
| Metric | Q3 FY25 (Dec 2024) | Q3 FY26 (Dec 2025) | YoY Change |
|---|---|---|---|
| Sales (₹ Cr) | 63,973 | 67,000* | ▲ ~4.7% |
| Expenses / Purchases (₹ Cr) | 46,939 | ~50,100* | ▲ |
| EBITDA / Operating Profit (₹ Cr) | 17,034 | 16,900–17,000* | Flat |
| Net Profit (₹ Cr) | 12,444 | 10,650 | ▼ 14.4% |
| EPS (₹) | 34.22 | ~29.3* | ▼ |
This comparison highlights that while revenue is higher than last year, profit has slipped, reflecting pressure on the bottom line.
Margins improve, beating expectations
In contrast to the profit decline, TCS delivered a positive surprise on operating performance.
- Q3 EBIT stood at ₹169 billion, compared with ₹163.36 billion in Q2
- The figure was slightly above the Street estimate of ₹168 billion
- EBIT margin improved to 25.17%, up from 24.83% in the previous quarter
- This was broadly in line with expectations of around 25.2%
The margin expansion points to better operational efficiency. It suggests that TCS has managed to control costs at the operating level, even in a tough demand environment. In the IT sector, margins are closely watched because they reflect how well companies manage employee costs, utilisation rates, and pricing power.
Dividend boost for shareholders
Along with the earnings, TCS announced a generous payout for shareholders. The company declared a regular dividend of ₹11 per share and a special dividend of ₹46 per share, taking the total payout to ₹57 per share.
For long-term investors, this is a major positive. TCS has a long track record of rewarding shareholders through dividends and buybacks, and this announcement reinforces its position as one of India’s most shareholder-friendly large-cap stocks. Even in a quarter where profit disappointed, the company’s strong cash position allows it to return capital to investors.
What investors should watch next
The market reaction to the TCS Q3 results is likely to be mixed. On one hand, revenue beat expectations, operating margins improved, and dividends remain generous. On the other, net profit fell sharply quarter-on-quarter and missed estimates by a wide margin.
Going forward, key areas to track include:
- management commentary on client spending trends
- deal wins and pipeline strength
- hiring plans and employee costs
- margin guidance for coming quarters
The next few earnings will reveal whether Q3 was a one-off soft patch for profits or part of a broader trend.
Shareholding pattern shows a shift
| Category | Jun 2025 | Sep 2025 | Change |
|---|---|---|---|
| Promoters | 71.77% | 71.77% | No change |
| FIIs | 11.48% | 10.33% | ▼ 1.15% |
| DIIs | 11.95% | 12.64% | ▲ 0.69% |
| Public | 4.77% | 5.21% | ▲ 0.44% |
The data shows foreign investors trimming their stake, while domestic institutions have increased theirs – a subtle shift in sentiment around the stock.
For now, TCS remains financially strong, operationally disciplined, and generous to shareholders. But the Q3 numbers make it clear that even the strongest players are not immune to a slowing global tech cycle.
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Disclaimer:
This article is for informational purposes only and does not constitute financial or investment advice. The data and views presented are based on publicly available information at the time of writing. Readers are advised to do their own research or consult a qualified financial advisor before making any investment decisions. The publisher and author shall not be responsible for any losses arising from the use of this information.
